Commentary: Nickel’s star performance underpinned by old and new drivers – by Andy Home (Reuters U.K. – May 21, 2018)

LONDON (Reuters) – Nickel is turning out to be the star performer of the major industrial metals so far this year. True, the London Metal Exchange (LME) price has retreated from April’s three-year high of $16,690 as panic that U.S. sanctions on Russia might be extended to Norilsk Nickel has dissipated.

But at a current $14,650 per tonne, LME three-month nickel is still up 16 percent on the start of the year. Tin, the second strongest performer among the LME base metals pack, is up by just two percent.

In China the Shanghai Futures Exchange (ShFE) contract largely ignored London’s Russian jitters but has also just notched up its highest trading level in three years. Both London and Shanghai markets are being buoyed by falling visible inventory, which is reinforcing a bullish narrative of supply shortfall.

FALLING STOCKS, RISING DEFICIT

LME stocks of nickel have fallen every month since August last year. At 303,576 tonnes, they are down by 63,036 tonnes, or 17 percent, on the start of 2018 and are now at their lowest level since June 2014.

Stocks registered with the ShFE closed last week at 33,000 tonnes, their lowest level since October 2015, when the Shanghai contract was in its infancy. Combined exchange stocks of 336,600 tonnes are now a long way off the highs above 500,000 tonnes seen during the first quarter of 2016.